With our worldwide network of over 6,100 locations and our www.gnc.com website, we are the
largest global specialty retailer of health and wellness products, including vitamins, minerals and
herbal supplements (VMHS) products, sports nutrition products, and diet products. We believe that
the strength of our GNC
®
brand, which is distinctively associated with health and wellness,
combined with our stores and website, give us broad access to consumers and uniquely position us to
benefit from the favorable trends driving growth in the nutritional supplements industry and the
broader health and wellness sector. We derive our revenues principally from product sales through
our company-owned stores, franchise activities, and sales of products manufactured in our
facilities to third parties. Our broad and deep product mix, which is focused on high-margin,
value-added nutritional products, is sold under our GNC proprietary brands, including Mega Men
®
,
Ultra Mega
®
, Pro Performance
®
, and Preventive Nutrition
®
, and under nationally recognized
third-party brands.

Our domestic retail network, which is approximately ten times larger than the next largest
U.S. specialty retailer of nutritional supplements, provides a leading platform for our vendors to
distribute their products to their target consumer. This gives us leverage with our vendor partners
and has enabled us to negotiate product exclusives and first-to-market opportunities. In addition,
our in-house product development capabilities enable us to offer our customers proprietary
merchandise that can only be purchased through our stores or our website. As the nutritional
supplement consumer often requires knowledgeable customer service, we also differentiate ourselves
from mass and drug retailers with our well-trained sales associates. We believe that our expansive
retail network, our differentiated merchandise offering, and our quality customer service result in
a unique shopping experience.

Our principal executive offices are located at 300 Sixth Avenue, Pittsburgh, Pennsylvania
15222, and our telephone number is (412) 288-4600. We also maintain a website at gnc.com. Our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the Exchange Act), except from March 16, 2007 to August 28,
2007 when our form S-4 filing became effective, when our equivalent reports were made available to
noteholders free of charge on our website or upon written request to 300 Sixth Avenue, Pittsburgh,
Pennsylvania 15222, Attention: Chief Legal Officer. The contents of our website are not
incorporated by reference in this report and shall not be deemed filed under the Exchange Act.

In this report, unless the context requires otherwise, references to we, us, our,
Company or GNC refer to General Nutrition Centers, Inc. and its subsidiaries.

Corporate History

We are a holding company and all of our operations are conducted through our operating
subsidiaries.

On February 8, 2007, GNC Parent Corporation, our ultimate parent company at that time, entered
into an Agreement and Plan of Merger with GNC Acquisition Inc. and its parent company, GNC
Acquisition Holdings Inc. On March 16, 2007, the merger (the Merger) was consummated. Pursuant
to the merger agreement, as amended, GNC Acquisition Inc. was merged with and into GNC Parent
Corporation, with GNC Parent Corporation as the surviving corporation. Subsequently on March 16,
2007, GNC Parent Corporation was converted into a Delaware limited liability company and renamed
GNC Parent LLC.

The merger consideration totaled $1.65 billion. The merger consideration was subject to
certain post-closing adjustments, including an adjustment for the aggregate amount of certain
differences of working capital from an agreed upon working capital target. In addition, as a result
of the Merger, our Parent will obtain certain tax benefits. Pursuant to the merger agreement, our
parent has agreed to make post-closing payments to GNC Parent Corporations former stockholders for
any tax refunds that it receives as a result of these tax benefits and as and to the extent its
future tax obligations are reduced by these tax benefits. We will not benefit from these tax
assets and will continue to make payments to our parent in respect of taxes without regard to these
tax benefits. The merger was funded with a combination of equity contributions and our issuance of
new debt. The new debt, which was entered into or issued on the closing, consisted of a new senior
credit facility comprised of a $675.0 million term loan facility and a $60.0 million revolving
credit facility (the New Senior Credit Facility), $300.0 million aggregate principal amount of
Senior Floating Rate Toggle Notes due 2014 (the New Senior Notes), and $110.0 million aggregate
principal amount of 10.75% Senior Subordinated Notes due 2015 (the New Senior Subordinated
Notes). We utilized proceeds from the new debt to repay our December 2003 senior credit facility,
our 8 5/8% senior notes issued in January 2005, and our 8
1
/
2
% senior subordinated notes issued in
December 2003. We contributed the remainder of the debt proceeds, after payment of fees and
expenses, to a newly formed, wholly owned subsidiary, which then loaned such net proceeds to GNC
Parent Corporation. GNC Parent Corporation used those proceeds, together with the equity
contributions, to repay GNC Parent Corporations outstanding floating rate senior PIK notes issued
in November 2006, pay the merger consideration, and pay fees and expenses related to the merger
transactions.

As a result of the Merger, GNC Acquisition Holdings Inc. became the sole equity holder of GNC
Parent LLC and the ultimate parent company of both GNC Corporation, our direct parent company, and
us. The outstanding capital stock of GNC Acquisition Holdings Inc. is beneficially owned by
affiliates of Ares Management LLC and Teachers Private Capital
(a division of Ontario Teachers' Pension Plan Board), certain institutional investors,
certain of our directors, and certain former stockholders of GNC Parent Corporation, including
members of our management. Refer to Note 1, Nature of Business, to our consolidated financial
statements included in this report for additional information.

GNC Parent Corporation was formed in November 2006 to acquire all the outstanding common stock
of GNC Corporation.

We were formed in October 2003 and GNC Corporation was formed as a Delaware corporation in
November 2003 by Apollo Management V, L.P. Apollo, an affiliate of Apollo Management V, L.P. and
members of our management to acquire General Nutrition Companies, Inc. from Numico USA, Inc., a
wholly owned subsidiary of Koninklijke (Royal) Numico N.V. (collectively, Numico). In December
2003, we purchased all of the outstanding equity interests of General Nutrition Companies, Inc.

General Nutrition Companies, Inc. was founded in 1935 by David Shakarian who opened its first
health food store in Pittsburgh, Pennsylvania. Since that time, the number of stores has continued
to grow, and General Nutrition Companies, Inc. began producing its own vitamin and mineral
supplements as well as foods, beverages, and cosmetics. General Nutrition Companies, Inc. was
acquired in August 1999 by Numico Investment Corp. and, prior to its acquisition, was a publicly
traded company listed on the Nasdaq National Market.

Industry Overview

We operate within the large and growing U.S. nutritional supplements retail industry.
According to Nutrition Business Journals Supplement Business Report 2007, our industry generated
an estimated $22.5 billion in sales in 2006 and an estimated $23.4 billion in 2007, and is
projected to grow at an average annual rate of approximately 4% per year for at least the next five
years. Our industry is also highly fragmented, and we believe this fragmentation provides large
operators, like us, the ability to compete more effectively due to scale advantages.

We expect several key demographic, healthcare, and lifestyle trends to drive the continued
growth of our industry. These trends include:



Increased Focus on Healthy Living:
Consumers are leading more active lifestyles
and becoming increasingly focused on healthy living, nutrition, and supplementation.
According to the Nutrition Business Journal, a study by the Hartman Group found that 85%
of the American population today is involved to some degree in health and wellness
compared to 70% to 75% a few years ago. We believe that growth in the nutritional
supplements industry will continue to be driven by consumers who increasingly embrace
health and wellness as a critical part of their lifestyles.



Aging Population:
The average age of the U.S. population is increasing.
U.S. Census Bureau data indicates that the number of Americans age 65 or older is
expected to increase by approximately 56% from 2000 to 2020. We believe that these
consumers are significantly more likely to use nutritional supplements, particularly
VMHS products, than younger persons and have higher levels of disposable income to
pursue healthy lifestyles.



Rising Healthcare Costs and Use of Preventive Measures:
Healthcare related costs
have increased substantially in the United States. A preliminary survey released by
Kaiser Family Foundation and the Health Research and Educational Trust in 2006 found
that between the spring of 2005 and the spring of 2006, premiums for employer-sponsored
health insurance increased by 7.7% more than twice the rate of general inflation for
the same period. To reduce medical costs and avoid the complexities of dealing with
the healthcare system, and given increasing incidence of medical problems and concern
over the use and effects of prescription drugs, many consumers take preventive measures,
including alternative medicines and nutritional supplements.



Increasing Focus on Fitness:
In total, U.S. health club memberships increased
4.9% between January 2004 and January 2006 from 39.4 million members to a record
41.3 million and has grown 70% from 24.1 million in 1995, according to the International
Health, Racquet & Sportsclub Association. We believe that the growing number of
fitness-oriented consumers, at increasingly younger ages, are interested in taking
sports nutrition products to increase energy, endurance, and strength during exercise
and to aid recovery after exercise.

Participants in our industry include specialty retailers, supermarkets, drugstores, mass
merchants, multi-level marketing organizations, mail-order companies, and a variety of other
smaller participants. The nutritional supplements sold through these channels are divided into four
major product categories: VMHS; sports nutrition products; diet products; and other wellness
products. Most supermarkets, drugstores, and mass merchants have narrow nutritional supplement
product offerings limited primarily to simple vitamins and herbs, with less knowledgeable sales
associates than specialty retailers. We believe that the market share of supermarkets, drugstores,
and mass merchants over the last five years has remained relatively constant.

The following charts illustrate, for the combined results of the predecessor from January 1 to
March 15, 2007 and the successor from March 16 to December 31, 2007, the percentage of our net
revenue generated by our three business segments and the percentage of our net U.S. retail
supplement revenue generated by our product categories:

Throughout 2007, we did not have any meaningful concentration of sales from any single product
or product line.

Retail Locations

Our retail network represents the largest specialty retail store network in the nutritional
supplements industry according to Nutrition Business Journals Supplement Business Report 2007. As
of December 31, 2007, there were 6,159 GNC store locations globally, including:



2,598 company-owned stores in the United States (all 50 states, the District of
Columbia, and Puerto Rico);

Most of our company-owned and franchised U.S. stores are between 1,000 and 2,000 square feet
and are located in shopping malls and strip centers. We have approximately ten times the domestic
store base of our nearest U.S. specialty retail competitor.

Website.
In December 2005 we also started selling products through our website, www.gnc.com.
This additional sales channel has enabled us to market and sell our products in regions where we do
not have retail operations or have limited operations. Some of the products offered on our website
may not be available at our retail locations, thus enabling us to broaden the assortment of
products available to our customers. The ability to purchase our products through the internet also
offers a convenient method for repeat customers to evaluate and purchase new and existing products.
To date, we believe that a majority of the sales generated by our website are incremental to the
revenues from our retail locations.

Franchise Activities

We generate income from franchise activities primarily through product sales to franchisees,
royalties on franchise retail sales, and franchise fees. To assist our franchisees in the
successful operation of their stores and to protect our brand image, we offer a number of services
to franchisees including training, site selection, construction assistance, and accounting
services. We believe that our franchise program enhances our brand awareness and market presence
and will enable us to continue to expand our store base internationally with limited capital
expenditures on our part. Over the last two years, we realigned our domestic franchise system with
our corporate strategies and re-acquired or closed unprofitable or non-compliant franchised stores
in order to improve the financial performance of the franchise system.

Store-Within-a-Store Locations

To increase brand awareness and promote access to customers who may not frequent specialty
nutrition stores, we entered into a strategic alliance in December 1998 with Rite Aid to open our
GNC store-within-a-store locations. Through this strategic alliance, we generate revenues from fees
paid by Rite Aid for new store-within-a-store openings, sales to Rite Aid of our products at
wholesale prices, the manufacture of Rite Aid private label products, and retail sales of certain
consigned inventory. In the third quarter of 2007, we extended our alliance with Rite Aid through
2014 with a five year option. At December 31, 2007, Rite Aid opened 140 stores of 1,125 additional
stores that Rite Aid has committed to open by December 31, 2014.

Marketing

We market our proprietary brands of nutritional products through an integrated marketing
program that includes television, print, and radio media, storefront graphics, direct mailings to
members of our Gold Card loyalty program, and point of purchase promotional materials.

Manufacturing and Distribution

With our technologically sophisticated manufacturing and distribution facilities supporting
our retail stores, we are a vertically integrated producer and supplier of high-quality nutritional
supplements. By controlling the production and distribution of our proprietary products, we can
protect product quality, monitor delivery times, and maintain appropriate inventory levels.

We offer a wide range of high-quality nutritional supplements sold under our GNC proprietary
brand names, including Mega Men, Ultra Mega, Pro Performance, and Preventive Nutrition, and under
nationally recognized third-party brand names. We report our sales in four major nutritional
supplement categories: VMHS; sports nutrition; diet; and other wellness. We offer an extensive mix
of brands and products, including approximately 2,600 SKUs across multiple categories. This variety
is designed to provide our customers with a vast selection of products to fit their specific needs.
Sales of our proprietary brands at our company-owned stores represented approximately 48% of our
net retail product revenues for 2007, 46% for 2006 and 47% for 2005.

Consumers may purchase a GNC Gold Card in any U.S. GNC store or at www.gnc.com for $15.00. A
Gold Card allows a consumer to save 20% on all store and on-line purchases on the day the card is
purchased and during the first seven days of every month for a year. Gold Card members also receive
personalized mailings and e-mails with product news, nutritional information, and exclusive offers.

Products are delivered to our retail stores through our distribution centers located in
Leetsdale, Pennsylvania; Anderson, South Carolina; and Phoenix, Arizona. Our distribution centers
support our company-owned stores as well as franchised stores and Rite Aid locations. Our
distribution fleet delivers our finished goods and third-party products through our distribution
centers to our company-owned and domestic franchised stores on a weekly or biweekly basis depending
on the sales volume of the store. Each of our distribution centers has a quality control department
that monitors products received from our vendors to ensure quality standards.

Based on data collected from our point-of-sale systems, excluding certain required accounting
adjustments of $(0.6) million for the period from January 1 to March 15, 2007, $5.0 million for the period from March 16 to December 31, 2007, $0.1 million for 2006, $3.0 million for 2005, and sales from
gnc.com of $6.7 million for the period from January 1 to March 15, 2007, $21.6 million for the period from March 16 to December 31, 2007, and $17.1 million in 2006, below is a comparison of our
company-owned domestic store retail product sales by major product category and the percentages of
our company-owned domestic store retail product sales for the periods shown:

Predecessor

Successor

Combined

Predecessor

Predecessor

Year ended December 31,

Period January 1 to

Period March 16 to

March 15, 2007

December 31, 2007

2007

2006

2005

(dollars in millions)

U.S Retail Product Categories:

VMHS Products

$

96.2

40.4

%

$

335.5

41.1

%

$

431.7

40.9

%

$

415.3

40.0

%

$

377.7

40.6

%

Sports Nutrition Products

85.6

35.9

%

291.1

35.7

%

376.6

35.7

%

369.7

35.6

%

330.3

35.5

%

Diet Products

35.7

15.0

%

116.8

14.3

%

152.4

14.5

%

158.7

15.3

%

135.2

14.5

%

Other Wellness Products

20.8

8.7

%

73.0

8.9

%

94.0

8.9

%

94.0

9.1

%

87.8

9.4

%

Total U.S. Retail revenues

$

238.3

100.0

%

$

816.4

100.0

%

$

1,054.7

100.0

%

$

1,037.7

100.0

%

$

931.0

100.0

%

VMHS

We sell vitamins and minerals in single vitamin and multi-vitamin form and in different
potency levels. Our vitamin and mineral products are available in liquid, tablets, soft gelatin,
and hard-shell capsules and powder forms. Many of our special vitamin and mineral formulations,
such as Mega Men and Ultra Mega, are available only at GNC locations. In addition to our selection
of VMHS products with unique formulations, we also offer the full range of standard alphabet
vitamins. We sell herbal supplements in various solid dosage and soft gelatin capsules, tea, and
liquid forms. We have consolidated our traditional herbal offerings under a single umbrella brand,
Herbal Plus
®
. In addition to the Herbal Plus line, we offer a full line of whole food-based
supplements and top selling herb and natural remedy products. Our target customers for VMHS
products are women over the age of 35.

We also offer a variety of specialty products in our GNC and Preventive Nutrition product
lines. These products emphasize third-party research and available literature regarding the
positive benefits from certain ingredients. These offerings include products designed to provide
nutritional support to specific areas of the body, such as joints, the heart and blood vessels, and
the digestive system.

Sports nutrition products are designed to be taken in conjunction with an exercise and fitness
regimen. Our target consumer for sports nutrition products is the 18-49 year old male. We typically
offer a broad selection of sports nutrition products, such as protein and weight gain powders,
sports drinks, sports bars, and high potency vitamin formulations, including GNC brands such as Pro
Performance and popular third-party products.

Diet Products

Diet products consist of various formulas designed to supplement the diet and exercise plans
of weight conscious consumers. Our target consumer for diet products is the 18-49 year old female.
We typically offer a variety of diet products, including pills, meal replacements, shakes, diet
bars, and teas. Our retail stores offer our proprietary and third-party products suitable for
different diet and weight management approaches, including low-carbohydrate and products designed
to increase thermogenesis (a change in the bodys metabolic rate measured in terms of calories) and
metabolism. We also offer several diet products, including our Body Answers
tm
product lines.

Other Wellness Products

Other wellness products is a comprehensive category that consists of sales of our Gold Card
preferred membership and sales of other nonsupplement products, including cosmetics, food items,
health management products, books, and video tapes.

Product Development

We believe a key driver of customer traffic and purchases is the introduction of new products.
According to the GNC 2005 Awareness Tracking Study Final Report commissioned by GNC from Parker
Marketing Research, consumers surveyed rated the availability of new, innovative products as an
emerging strength of our business. We identify changing customer trends through interactions with
our customers and leading industry vendors to assist in the development, manufacturing, and
marketing of our new products. We develop proprietary products independently and through the
collaborative effort of our dedicated development team. During 2007, we targeted our product
development efforts on specialty vitamins and sports nutrition products, condition specific
products, and specialty vitamins.

Research and Development

We have an internal research and development group that performs scientific research on
potential new products and enhancements to existing products, in part to assist our product
development team in creating new products, and in part to support claims that may be made as to the
purpose and function of the product.

We generate revenues from our three business segments, Retail, Franchise, and
Manufacturing/Wholesale. The following chart outlines our business segments and the historical
contribution to our consolidated revenues by those segments, after intercompany eliminations. For a
description of operating income (loss) by business segment, our total assets by business segment,
total revenues by geographic area, and total assets by geographic area, see the Segments note to
our consolidated financial statements included in this report.

Year ended December 31,

2007

2006

2005

(dollars in millions)

Retail

$

1,168.6

75.3

%

$

1,122.7

75.5

%

$

989.5

75.1

%

Franchise

241.1

15.5

%

232.3

15.6

%

212.8

16.1

%

Manufacturing/Wholesale
(Third Party)

143.1

9.2

%

132.1

8.9

%

115.4

8.8

%

Total

$

1,552.8

100.0

%

$

1,487.1

100.0

%

$

1,317.7

100.0

%

Retail

Our Retail segment generates revenues primarily from sales of products to customers at our
company-owned stores in the United States and Canada, and in December 2005 we started selling
products through our website, www.gnc.com.

Locations

As of December 31, 2007, we operated 2,745 company-owned stores across all 50 states and in
Canada, Puerto Rico, and Washington, D.C. Most of our U.S. company-owned stores are between 1,000
and 2,000 square feet and are located primarily in shopping malls and strip shopping centers.
Traditional mall and strip center locations typically generate a large percentage of our total
retail sales. With the exception of our downtown stores, all of our company-owned stores follow one
of two consistent formats, one for mall locations and one for strip shopping center locations. Our
store graphics are periodically redesigned to better identify with our GNC customers and provide
product information to allow the consumer to make educated decisions regarding product purchases
and usage. Our product labeling is consistent within our product lines and the stores are designed
to present a unified approach to packaging with emphasis on added information for the consumer. As
an on-going practice, we continue to reset and upgrade all of our company-owned stores to maintain
a more modern and customer-friendly layout, while promoting our GNC Live Well theme.

As a means of enhancing our operating performance and building our store base, we began
opening franchised locations in 1988. As of December 31, 2007, there were 2,056 franchised stores
operating, including 978 stores in the United States and 1,078 stores operating in 49 international
locations. Approximately 89% of our franchised stores in the United States are in strip shopping
centers and are typically between 1,000 and 2,000 square feet. The international franchised stores
are typically
smaller and, depending upon the country and cultural preferences, are located in mall, strip
center, street, or store-within-a-store locations. Typically, our international stores have a store
format and signage similar to our U.S. franchised stores. To assist our franchisees in the
successful operation of their stores and to protect our brand image, we offer site selection,
construction assistance, accounting services, and

a three-part training program, which consists of
classroom instruction and training in a company-owned location, both of which occur prior to the
franchised store opening, and actual on-site training during the first week of operations of the
franchised store. We believe we have good relationships with our franchisees, as evidenced by our
franchisee renewal rate of over 92% between 2002 and 2007. We do not rely heavily on any single
franchise operator in the United States, since the largest franchisee owns and/or operates 12 store
locations.

All of our franchised stores in the United States offer both our proprietary products and
third-party products, with a product selection similar to that of our company-owned stores. Our
international franchised stores offer a more limited product selection than our franchised stores
in the United States with the product selection heavily weighted toward proprietary products.
Products are distributed to our franchised stores in the United States through our distribution
centers and transportation fleet in the same manner as our company-owned stores. Products
distributed to our international franchised stores are delivered to the franchisees freight
forwarder at the U.S. port of deportation, at which point our responsibility for the delivery of
the products ends.

Franchises in the United States

Revenues from our franchisees in the United States accounted for approximately 72% of our
total franchise revenues for the year ended December 31, 2007. In 2007, new franchisees in the
United States were required to pay an initial fee of $40,000 for a franchise license. Existing GNC
franchise operators may purchase an additional franchise license for a $30,000 fee. We typically
offer limited financing to qualified franchisees in the United States for terms up to five years.
Once a store begins operations, franchisees are required to pay us a continuing royalty of 6% of
sales and contribute 3% of sales to a national advertising fund. Our standard franchise agreements
for the United States are effective for a ten-year period with two five-year renewal options. At
the end of the initial term and each of the renewal periods, the renewal fee is generally 33% of
the franchisee fee that is then in effect. The franchisee renewal option is at our election for all
franchise agreements executed after December 1995. Franchisees must meet certain conditions in
order to exercise the franchisee renewal option. Our franchisees in the United States receive
limited geographical exclusivity and are required to follow the GNC store format.

Franchisees must meet certain minimum standards and duties prescribed by our franchise
operations manual and we conduct periodic field visit reports to ensure our minimum standards are
maintained. Generally, we enter into a five-year lease with one five-year renewal option with
landlords for our franchised locations in the United States. This allows us to secure space at
cost-effective rates, which we sublease to our franchisees at cost. By subleasing to our
franchisees, we have greater control over the location and have greater bargaining power for lease
negotiations than an individual franchisee typically would have. In addition, we can elect not to
renew subleases for underperforming locations. If a franchisee does not meet specified performance
and appearance criteria, the franchise agreement outlines the procedures under which we are
permitted to terminate the franchise agreement. In these situations, we may take possession of the
location, inventory, and equipment, and operate the store as a company-owned store or re-franchise
the location. The offering and sale of our franchises in the United States are regulated by the FTC
and various stated authorities. See Government RegulationFranchise Regulation.

International Franchises

Revenues from our international franchisees accounted for approximately 28% of our total
franchise revenues for the year ended December 31, 2007. In 2007, new international franchisees
were required to pay an initial fee of approximately $25,000 for a franchise license for each full
size store and on average continuing royalty fees of approximately 5%, with fees and royalties
varying depending on the country and the store type. Our franchise program has enabled us to
expand into international markets with limited capital expenditures. We expanded our international
presence from 557 international

franchised locations at the end of 2002 to 1,078 international locations as of December 31,
2007, without incurring any capital expenditures related to this expansion. We typically generate
less revenue from franchises outside the United States due to lower international royalty rates and
due to the franchisees purchasing a smaller percentage of products from us compared to our domestic
franchisees.

Franchisees in international locations enter into development agreements with us for either
full-size stores, a store-within-a-store at a host location, or wholesale distribution center
operations. The development agreement grants the franchisee the right to develop a specific number
of stores in a territory, often the entire country. The international franchisee then enters into
a franchise agreement for each location. The full-size store franchise agreement has an initial
ten-year term with two five-year renewal options. At the end of the initial term and renewal
periods, the international franchisee has the option to renew the agreement at 33% of the franchise
fee that is then in effect. Franchise agreements for international store-within-a-store locations
have an initial term of five years, with two five-year renewal options. At the end of the initial
term and each of the renewal periods, the international franchisee of a store-within-a-store
location has the option to renew the agreement for up to a maximum of 50% of the franchise fee that
is then in effect. Our international franchisees often receive exclusive franchising rights to the
entire country franchised, excluding military bases. Our international franchisees must meet
minimum standards and duties similar to our U.S. franchisees. Our international franchise
agreements and international operations may be regulated by various country, local and
international laws. See Government RegulationFranchise Regulation.

Manufacturing/Wholesale

Our Manufacturing/Wholesale segment is comprised of our manufacturing operations in South
Carolina and our wholesale sales business. This segment supplies our Retail and Franchise segments
as well as various third parties with finished products. Our Manufacturing/Wholesale segment
generates revenues through sales of manufactured products to third parties, and the sale of our
proprietary and third-party brand products to Rite Aid and drugstore.com. Our wholesale operations,
including our Rite Aid and drugstore.com wholesale operations, are supported primarily by our
Anderson, South Carolina distribution center.

Manufacturing

Our technologically sophisticated manufacturing and warehousing facilities support our Retail
and Franchise segments and enable us to control the production and distribution of our proprietary
products, to better control costs, to protect product quality, to monitor delivery times, and to
maintain appropriate inventory levels. We operate two manufacturing facilities, one in Greenville,
South Carolina and one in Anderson, South Carolina. We utilize our plants primarily for the
production of proprietary products. Our manufacturing operations are designed to allow low-cost
production of a variety of products of different quantities, sizes, and packaging configurations
while maintaining strict levels of quality control. Our manufacturing procedures are designed to
promote consistency and quality in our finished goods. We conduct sample testing on raw materials
and finished products, including weight, purity, and micro-bacterial testing. Our manufacturing
facilities also service our wholesale operations, including the manufacture and supply of Rite Aid
private label products for distribution to Rite Aid locations. We use our available capacity at
these facilities to produce products for sale to third-party customers.

The principal raw materials used in the manufacturing process are natural and synthetic
vitamins, herbs, minerals, and gelatin. We maintain multiple sources for the majority of our raw
materials, with the remaining being single-sourced due to the uniqueness of the material. As of
December 31, 2007, no one vendor supplied more than 10% of our raw materials. Our distribution
fleet delivers raw materials and components to our manufacturing facilities and also delivers our
finished goods and third-party products to our distribution centers.

To increase brand awareness and promote access to customers who may not frequent specialty
nutrition stores, we entered into a strategic alliance with Rite Aid to open GNC
store-within-a-store locations. As of December 31, 2007, we had 1,358 store-within-a-store
locations. Through this strategic alliance, we generate revenues from sales to Rite Aid of our
products at wholesale prices, the manufacture of Rite Aid private label products, retail sales of
certain consigned inventory and license fees. We are Rite Aids sole supplier for the PharmAssure
®
vitamin brand and a number of Rite Aid private label supplements. In the third quarter of 2007, we
extended our alliance with Rite Aid through 2014 with a five year option. At December 31, 2007,
Rite Aid had opened 140 stores of 1,125 additional stores that Rite Aid has committed to open by
December 31, 2014.

Distribution Agreement with drugstore.com

We have an internet distribution agreement with drugstore.com, inc. with an initial term
through June 2009. Through this strategic alliance, drugstore.com was the exclusive internet
retailer of our proprietary products, the PharmAssure vitamin brand, and certain other nutritional
supplements until June 2005, when this exclusive relationship terminated. This alliance allows us
to access a larger base of customers, who may not otherwise live close to, or have the time to
visit, a GNC store and provides an internet distribution channel in addition to www.gnc.com. We
generate revenues from the distribution agreement with drugstore.com through sales of our
proprietary and third-party products on a wholesale basis and through retail sales of certain other
products on a consignment basis.

Employees

As of December 31, 2007, we had a total of 5,158 full-time and 8,081 part-time employees, of
whom approximately 10,753 were employed in our Retail segment; 33 were employed in our Franchise
segment; 1,307 were employed in our Manufacturing/Wholesale segment; 475 were employed in corporate
support functions; and 671 were employed in Canada. None of our employees belongs to a union or is
a party to any collective bargaining or similar agreement. We consider our relationships with our
employees to be good.

Competition

The U.S. nutritional supplements retail industry is a large, highly fragmented, and growing
industry, with no single industry participant accounting for a majority of total industry retail
sales. Competition is based primarily on price, quality, and assortment of products, customer
service, marketing support, and availability of new products. In addition, the market is highly
sensitive to the introduction of new products.

We compete with publicly owned and privately owned companies, which are highly fragmented in
terms of geographical market coverage and product categories. We compete with other specialty
retailers, supermarkets, drugstores, mass merchants, multi-level marketing organizations,
mail-order companies, other internet sites, and a variety of other smaller participants. In
addition, we believe that the market is highly sensitive to the introduction of new products,
including various prescription drugs, which may rapidly capture a significant share of the market.
In the United States, we compete with supermarkets, drugstores, and mass merchants with heavily
advertised national brands manufactured by large pharmaceutical and food companies and other
retailers. Most supermarkets, drugstores, and mass merchants have narrow product offerings limited
primarily to simple vitamins and herbs and popular third-party

diet products. Our international competitors also include large international pharmacy chains
and major international supermarket chains as well as other large U.S.-based companies with
international operations. Our wholesale and manufacturing operations also compete with other
wholesalers and manufacturers of third-party nutritional supplements.

Trademarks and Other Intellectual Property

We believe trademark protection is particularly important to the maintenance of the recognized
brand names under which we market our products. We own or have rights to material trademarks or
trade names that we use in conjunction with the sale of our products, including the GNC brand name.
We also rely upon trade secrets, know-how, continuing technological innovations, and licensing
opportunities to develop and maintain our competitive position. We protect our intellectual
property rights through a variety of methods, including trademark, patent, and trade secret laws,
as well as confidentiality agreements and proprietary information agreements with vendors,
employees, consultants, and others who have access to our proprietary information. Protection of
our intellectual property often affords us the opportunity to enhance our position in the
marketplace by precluding our competitors from using or otherwise exploiting our technology and
brands. We are also a party to several intellectual property license agreements relating to certain
of our products. For example, we are a party to license agreements entered into in connection with
the Numico acquisition pursuant to which we license certain patent rights to Numico and Numico
licenses to us specific patent rights and proprietary information. These license agreements
generally continue in existence until the expiration of the licensed patent, if applicable, the
licensees election to terminate the agreement, or the mutual consent of the parties. The patents
which we own generally have a term of 20 years from their filing date, although none of our owned
or licensed patents are currently associated with a material portion of our business. The duration
of our trademark registrations is generally 10, 15, or 20 years, depending on the country in which
the marks are registered, and the registrations can be renewed by us. The scope and duration of our
intellectual property protection varies throughout the world by jurisdiction and by individual
product.

Insurance and Risk Management

We purchase insurance to cover standard risks in the nutritional supplements industry,
including policies to cover general products liability, workers compensation, auto liability, and
other casualty and property risks. Our insurance rates are dependent upon our safety record as well
as trends in the insurance industry. We also maintain workers compensation insurance and auto
insurance policies that are retrospective in that the cost per year will vary depending on the
frequency and severity of claims in the policy year. We currently maintain product liability
insurance and general liability insurance.

We face an inherent risk of exposure to product liability claims in the event that, among
other things, the use of products sold by GNC results in injury. With respect to product liability
coverage, we carry insurance coverage typical of our industry and product lines. Our coverage
involves self-insured retentions with primary and excess liability coverage above the retention
amount. We have the ability to refer claims to most of our vendors and their insurers to pay the
costs associated with any claims arising from such vendors products. In many cases, our insurance
covers such claims that are not adequately covered by a vendors insurance and provides for excess
secondary coverage above the limits provided by our product vendors.

We self-insure certain property and casualty risks due to our analysis of the risk, the
frequency and severity of a loss, and the cost of insurance for the risk. We believe that the
amount of self-insurance is not significant and will not have an adverse impact on our performance.
In addition, we may from time to time self-insure liability with respect to specific ingredients in
products that we may sell.

The processing, formulation, manufacturing, packaging, labeling, advertising, and distribution
of our products are subject to regulation by one or more federal agencies, including the Food and
Drug Administration (FDA), the FTC, the Consumer Product Safety Commission, the United States
Department of Agriculture, and the Environmental Protection Agency. These activities are also
regulated by various agencies of the states and localities in which our products are sold. Pursuant
to the Federal Food, Drug, and Cosmetic Act (FDCA), the FDA regulates the formulation, safety,
manufacture, packaging, labeling, and distribution of dietary supplements, (including vitamins,
minerals, and herbs), and over-the-counter drugs. The FTC has jurisdiction to regulate the
advertising of these products.

The FDCA has been amended several times with respect to dietary supplements, in particular by
the Dietary Supplement Health and Education Act of 1994 (DSHEA). DSHEA established a new
framework governing the composition, safety, labeling and marketing of dietary supplements.
Dietary supplements are defined as vitamins, minerals, herbs, other botanicals, amino acids, and
other dietary substances for human use to supplement the diet, as well as concentrates,
metabolites, constituents, extracts, or combinations of such dietary ingredients. Generally, under
DSHEA, dietary ingredients that were marketed in the United States prior to October 15, 1994 may be
used in dietary supplements without notifying the FDA. New dietary ingredients (i.e., dietary
ingredients that were not marketed in the United States before October 15, 1994) must be the
subject of a new dietary ingredient notification submitted to the FDA unless the ingredient has
been present in the food supply as an article used for food without being chemically altered. A
new dietary ingredient notification must provide the FDA evidence of a history of use or other
evidence of safety establishing that use of the dietary ingredient will reasonably be expected to
be safe. A new dietary ingredient notification must be submitted to the FDA at least 75 days
before the initial marketing of the new dietary ingredient. The FDA may determine that a new
dietary ingredient notification does not provide an adequate basis to conclude that a dietary
ingredient is reasonably expected to be safe. Such a determination could prevent the marketing of
such dietary ingredient. The FDA has announced that it plans to issue a guidance governing
notification of new dietary ingredients. While FDA guidance is not mandatory, they are a strong
indication of the FDAs current views on the topic of the guidance, including its position on
enforcement. Depending upon the recommendations made in the guidance, particularly those relating
to animal or human testing, such guidance could make it more difficult for us to successfully
notify new dietary ingredients.

The FDA issued a consumer warning in 1996, followed by proposed regulations in 1997, covering
dietary supplements that contain ephedrine alkaloids, which are obtained from the botanical species
ephedra and are commonly referred to as ephedra. In February 2003 the Department of Health and
Human Services announced a series of actions that the Department of Health and Human Services and
the FDA planned to execute with respect to products containing ephedra, including the solicitation
of evidence regarding the significant or unreasonable risk of illness or injury from dietary
supplements containing ephedra and the immediate execution of a series of actions against ephedra
products making unsubstantiated claims about sports performance enhancement. In addition, many
states proposed regulations and three states enacted laws restricting the promotion and
distribution of ephedra-containing dietary supplements. The botanical ingredient ephedra was
formerly used in several third-party and private label dietary supplement products. In January
2003, we began focusing our diet category on products that would replace ephedra products. In early
2003, we instructed all of our locations to stop selling products containing ephedra that were
manufactured by GNC or one of our affiliates. Subsequently, we instructed all of our locations to
stop selling any products containing ephedra by June 30, 2003. Sales of products containing ephedra
amounted to approximately $35.2 million or 3.3% of our retail sales in 2003 and $182.9 million, or
17.1% of our retail sales in 2002. In February 2004, the FDA issued a final regulation declaring
dietary supplements containing ephedra illegal under the FDCA because they present an unreasonable
risk of illness or injury under the conditions of use recommended or suggested in labeling, or if
no conditions of use are suggested or recommended in labeling, under

ordinary conditions of use. The rule took effect April 12, 2004 and banned the sale of dietary
supplement products containing ephedra. Similarly, the FDA issued a consumer advisory in 2002 with
respect to dietary supplements that contain the ingredient Kava Kava, and the FDA is currently
investigating adverse effects associated with ingestion of this ingredient. One of our
subsidiaries, Nutra Manufacturing, Inc., manufactured products containing Kava Kava from December
1995 until August 2002. All stores were instructed to stop selling products containing Kava Kava in
December 2002. The FDA could take similar actions against other products or product ingredients
which it determines present an unreasonable health risk to consumers.

DSHEA permits statements of nutritional support to be included in labeling for dietary
supplements without FDA pre-market approval. Such statements must be submitted to the FDA within 30
days of marketing, and dietary supplements bearing such claims must include a label disclosure that
This statement has not been evaluated by the Food and Drug Administration. This product is not
intended to diagnose, treat, cure, or prevent any disease. Such statements may describe how a
particular dietary ingredient affects the structure, function, or general well-being of the body,
or the mechanism of action by which a dietary ingredient may affect body structure, function, or
well-being, but may not expressly or implicitly represent that a dietary supplement will diagnose,
cure, mitigate, treat, or prevent a disease. A company that uses a statement of nutritional support
in labeling must possess scientific evidence substantiating that the statement is truthful and not
misleading. If the FDA determines that a particular statement of nutritional support is an
unacceptable drug claim or an unauthorized version of a health claim, or, if the FDA determines
that a particular claim is not adequately supported by existing scientific data or is false or
misleading, we would be prevented from using the claim.

In addition, DSHEA provides that so-called third-party literature, e.g., a reprint of a
peer-reviewed scientific publication linking a particular dietary ingredient with health benefits,
may be used in connection with the sale of a dietary supplement to consumers without the
literature being subject to regulation as labeling. The literature: (1) must not be false or
misleading; (2) may not promote a particular manufacturer or brand of dietary supplement; (3)
must present a balanced view of the available scientific information on the subject matter; (4) if
displayed in an establishment, must be physically separate from the dietary supplements; and (5)
should not have appended to it any information by sticker or any other method. If the literature
fails to satisfy each of these requirements, we may be prevented from disseminating such literature
with our products, and any dissemination could subject our product to regulatory action as an
illegal drug.

On June 22, 2007, the FDA issued a final rule establishing regulations to require good
manufacturing practices (GMPs) for dietary supplements. The regulations establish the GMPs to
ensure quality throughout the manufacturing, packaging, labeling, and storing of dietary
supplements. The final rule includes requirements for establishing quality control procedures,
designing and constructing manufacturing plants, testing ingredients and the finished product,
recordkeeping, and handling consumer product complaints. As a companion document, the FDA also
issued an interim final rule that outlines a petition process for manufacturers to request an
exemption to the GMP requirement for 100 percent identity testing of specific dietary ingredients
used in the processing of dietary supplements. Under the interim final rule, the manufacturer may
be exempted from the dietary ingredient identity testing requirement if it can provide sufficient
documentation that the reduced frequency of testing requested would still ensure the identity of
the dietary ingredient. Companies with more than 500 employees have until June 2008 to comply with
the new regulations, companies with less than 500 employees have until June 2009 to comply, and
companies with fewer than 20 employees have until June 2010 to comply. We or our third-party
suppliers or vendors may not be able to comply with the new rules without incurring substantial
additional expenses. In addition, if our third-party suppliers or vendors are not able to timely
comply with the new rules, we may experience increased costs or delays in obtaining certain raw
materials and third-party products.

In December 2006, Congress passed the Dietary Supplement and Nonprescription Consumer
Protection Act (S3546) (Act). The Act, which became effective in December 2007, mandates
reporting of serious adverse events associated with dietary supplements and over-the-counter
drugs to FDA by a

manufacturer, packer, or distributor whose name appears on the label of the product. Records
must be maintained of all adverse events for six years after receipt. The Act also makes submission
of a false report to FDA illegal. We may not be able to comply with the new requirements without
incurring substantial additional expenses.

The FDA has broad authority to enforce the provisions of the FDCA applicable to dietary
supplements, including powers to issue a public warning or notice of violation letter to a company,
to publicize information about illegal products, detain products intended for import, to request a
recall of illegal products from the market, and to request the Department of Justice to initiate a
seizure action, an injunction action, or a criminal prosecution in the United States courts. The
regulation of dietary supplements may increase or become more restrictive in the future.

Legislation may be introduced which, if passed, would impose substantial new regulatory
requirements on dietary supplements. HR 1249 would subject the dietary ingredient
dehydroepiandrosterone (DHEA) to the requirements of the Controlled Substances Act, which would
prevent our ability to sell products containing DHEA. S 2470 would amend the Controlled
Substances Act to restrict the sale of DHEA-containing dietary supplements to minors. In October
2004, legislation was passed subjecting specified substances formerly used in some dietary
supplements, such as androstenedione or andro, to the requirements of the Controlled Substances
Act. Under the 2004 law, these substances can no longer be sold as dietary supplements.

The FTC exercises jurisdiction over the advertising of dietary supplements and
over-the-counter drugs. In recent years, the FTC has instituted numerous enforcement actions
against dietary supplement companies for failure to have adequate substantiation for claims made in
advertising or for the use of false or misleading advertising claims. We continue to be subject to
three consent orders issued by the FTC. In 1984, the FTC instituted an investigation of General
Nutrition, Incorporated, one of our subsidiaries, alleging deceptive acts and practices in
connection with the advertising and marketing of certain of its products. General Nutrition,
Incorporated accepted a proposed consent order which was finalized in 1989, under which it agreed
to refrain from, among other things, making certain claims with respect to certain of its products
unless the claims are based on and substantiated by reliable and competent scientific evidence, and
paid an aggregate of $0.6 million to the American Diabetes Association, Inc., the American Cancer
Society, Inc., and the American Heart Association for the support of research in the fields of
nutrition, obesity, or physical fitness. We also entered into a consent order in 1970 with the FTC,
which generally addressed iron deficiency anemia type products. As a result of routine monitoring
by the FTC, disputes arose concerning its compliance with these orders and with regard to
advertising for certain hair care products. While General Nutrition, Incorporated believes that, at
all times, it operated in material compliance with the orders, it entered into a settlement in 1994
with the FTC to avoid protracted litigation. As a part of this settlement, General Nutrition,
Incorporated entered into a consent decree and paid, without admitting liability, a civil penalty
in the amount of $2.4 million and agreed to adhere to the terms of the 1970 and 1989 consent orders
and to abide by the provisions of the settlement document concerning hair care products. We do not
believe that future compliance with the outstanding consent decrees will materially affect our
business operations. In 2000, the FTC amended the 1970 order to clarify language in it that was
believed to be ambiguous and outmoded.

The FTC continues to monitor our advertising and, from time to time, requests substantiation
with respect to such advertising to assess compliance with the various outstanding consent decrees
and with the Federal Trade Commission Act. Our policy is to use advertising that complies with the
consent decrees and applicable regulations. We review all products brought into our distribution
centers to assure that such products and their labels comply with the consent decrees. We also
review the use of third-party point of purchase materials such as store signs and promotional
brochures. Nevertheless, there can be no assurance that inadvertent failures to comply with the
consent decrees and applicable regulations will not occur. Some of the products sold by franchised
stores are purchased by franchisees directly from other vendors and these products do not flow
through our distribution centers. Although franchise contracts contain strict requirements for
store operations, including compliance with federal, state, and local laws and regulations, we
cannot exercise the same degree of control over franchisees as we do over our company-owned stores.
As a result of our efforts to comply with applicable statutes and

regulations, we have from time to time reformulated, eliminated, or relabeled certain of our
products and revised certain provisions of our sales and marketing program. We believe we are in
material compliance with the various consent decrees and with applicable federal, state, and local rules and
regulations concerning our products and marketing program. Compliance with the provisions of
national, state, and local environmental laws and regulations has not had a material effect upon
our capital expenditures, earnings, financial position, liquidity, or competitive position.

Foreign

Our products sold in foreign countries are also subject to regulation under various national,
local, and international laws that include provisions governing, among other things, the
formulation, manufacturing, packaging, labeling, advertising, and distribution of dietary
supplements and over-the-counter drugs. Government regulations in foreign countries may prevent or
delay the introduction, or require the reformulation, of certain of our products.

New Legislation or Regulation

We cannot determine what effect additional domestic or international governmental legislation,
regulations, or administrative orders, when and if promulgated, would have on our business in the
future. New legislation or regulations may require the reformulation of certain products to meet
new standards, require the recall or discontinuance of certain products not capable of
reformulation, impose additional record keeping, or require expanded documentation of the
properties of certain products, expanded or different labeling, or scientific substantiation.

Franchise Regulation

We must comply with regulations adopted by the FTC and with several state laws that regulate
the offer and sale of franchises. The FTCs Trade Regulation Rule on Franchising and certain state
laws require that we furnish prospective franchisees with a franchise offering circular containing
information prescribed by the Trade Regulation Rule on Franchising and applicable state laws and
regulations.

We also must comply with a number of state laws that regulate some substantive aspects of the
franchisor-franchisee relationship. These laws may limit a franchisors business practices in a
number of ways, including limiting the ability to:



terminate or not renew a franchise without good cause;



interfere with the right of free association among franchisees;



disapprove the transfer of a franchise;



discriminate among franchisees with regard to franchise terms and charges, royalties,
and other fees; and



place new stores near existing franchises.

To date, these laws have not precluded us from seeking franchisees in any given area and have
not had a material adverse effect on our operations. Bills intended to regulate certain aspects of
franchise relationships have been introduced into Congress on several occasions during the last
decade, but none have been enacted. Revisions to the FTC rule have also been proposed by the FTC
and currently are in the comment stage of the rulemaking process.

Our international franchise agreements and franchise operations are regulated by various
foreign laws, rules, and regulations. To date, these laws have not precluded us from seeking
franchisees in any given area and have not had a material adverse effect on our operations.

We are subject to numerous federal, state, local, and foreign environmental and health and
safety laws and regulations governing our operations, including the handling, transportation, and
disposal of our non-hazardous and hazardous substances and wastes, as well as emissions and
discharges from our operations into the environment, including discharges to air, surface water,
and groundwater. Failure to comply with such laws and regulations could result in costs for
remedial actions, penalties, or the imposition of other liabilities. New laws, changes in existing
laws or the interpretation thereof, or the development of new facts or changes in our processes
could also cause us to incur additional capital and operation expenditures to maintain compliance
with environmental laws and regulations and environmental permits. We also are subject to laws and
regulations that impose liability and cleanup responsibility for releases of hazardous substances
into the environment without regard to fault or knowledge about the condition or action causing the
liability. Under certain of these laws and regulations, such liabilities can be imposed for cleanup
of previously owned or operated properties, or for properties to which substances or wastes were
sent in connection with current or former operations at our facilities. The presence of
contamination from such substances or wastes could also adversely affect our ability to sell or
lease our properties, or to use them as collateral for financing. From time to time, we have
incurred costs and obligations for correcting environmental and health and safety noncompliance
matters and for remediation at or relating to certain of our properties or properties at which our
waste has been disposed. We believe we have complied with, and are currently complying with, our
environmental obligations pursuant to environmental and health and safety laws and regulations and
that any liabilities for noncompliance will not have a material adverse effect on our business or
financial performance. However, it is difficult to predict future liabilities and obligations,
which could be material.

The following risk factors, among others, could cause our financial performance to differ
significantly from the goals, plans, objectives, intentions and expectations expressed in this
report. If any of the following risks and uncertainties or other risks and uncertainties not
currently known to us or not currently considered to be material actually occur, our business,
financial condition, or operating results could be harmed substantially.

The U.S. nutritional supplements retail industry is large and highly fragmented. Participants
include specialty retailers, supermarkets, drugstores, mass merchants, multi-level marketing
organizations, on-line merchants, mail-order companies, and a variety of other smaller
participants. We believe that the market is also highly sensitive to the introduction of new
products, including various prescription drugs, which may rapidly capture a significant share of
the market. In the United States, we also compete for sales with heavily advertised national brands
manufactured by large pharmaceutical and food companies, as well as other retailers. In addition,
as some products become more mainstream, we experience increased competition for those products as
more participants enter the market. For example, when the trend in favor of low-carbohydrate
products developed, we experienced increased competition for our diet products from supermarkets,
drug stores, mass merchants, and other food companies, which adversely affected sales of our diet
products. Our international competitors include large international pharmacy chains, major
international supermarket chains, and other large U.S.-based companies with international
operations. Our wholesale and manufacturing operations compete with other wholesalers and
manufacturers of third-party nutritional supplements. We may not be able to compete effectively and
our attempt to do so may require us to reduce our prices, which may result in lower margins.
Failure to effectively compete could adversely affect our market share, revenues, and growth
prospects.

Unfavorable publicity or consumer perception of our products and any similar products distributed
by other companies could cause fluctuations in our operating results and could have a material
adverse effect on our reputation, the demand for our products, and our ability to generate
revenues.

We are highly dependent upon consumer perception of the safety and quality of our products, as
well as similar products distributed by other companies. Consumer perception of products can be
significantly influenced by scientific research or findings, national media attention, and other
publicity about product use. A product may be received favorably, resulting in high sales
associated with that product that may not be sustainable as consumer preferences change. Future
scientific research or publicity could be unfavorable to our industry or any of our particular
products and may not be consistent with earlier favorable research or publicity. A future research
report or publicity that is perceived by our consumers as less favorable or that questions earlier
research or publicity could have a material adverse effect on our ability to generate revenues. For
example, sales of some of our VMHS products, such as St. Johns Wort, Sam-e, and Melatonin, and
more recently sales of Vitamin E, were initially strong, but we believe decreased substantially as
a result of negative publicity. As a result of the above factors, our operations may fluctuate
significantly from quarter to quarter, which may impair our ability to make payments when due on
our debt. Period-to-period comparisons of our results should not be relied upon as a measure of our
future performance. Adverse publicity in the form of published scientific research or otherwise,
whether or not accurate, that associates consumption of our products or any other similar products
with illness or other adverse effects, that questions the benefits of our or similar products, or
that claims that such products are ineffective could have a material adverse effect on our
reputation, the demand for our products, and our ability to generate revenues.

Our failure to appropriately respond to changing consumer preferences and demand for new products
could significantly harm our customer relationships and product sales.

Our business is particularly subject to changing consumer trends and preferences, especially
with respect to our diet products. For example, the recent trend in favor of low-carbohydrate diets
was not as dependent on diet products as many other dietary programs, which caused and may continue
to cause a significant reduction in sales in our diet category. Our continued success depends in
part on our ability to anticipate and respond to these changes, and we may not be able to respond
in a timely or commercially appropriate manner to these changes. If we are unable to do so, our
customer relationships and product sales could be harmed significantly.

Furthermore, the nutritional supplement industry is characterized by rapid and frequent
changes in demand for products and new product introductions. Our failure to accurately predict
these trends could negatively impact consumer opinion of our stores as a source for the latest
products. This could harm our customer relationships and cause losses to our market share. The
success of our new product offerings depends upon a number of factors, including our ability to:



accurately anticipate customer needs;



innovate and develop new products;



successfully commercialize new products in a timely manner;



price our products competitively;



manufacture and deliver our products in sufficient volumes and in a timely manner; and



differentiate our product offerings from those of our competitors.

If we do not introduce new products or make enhancements to meet the changing needs of our
customers in a timely manner, some of our products could become obsolete, which could have a
material adverse effect on our revenues and operating results.

We depend on the services of key executives and changes in our management team could affect our
business strategy and adversely impact our performance and results of operations.

Some of our senior executives are important to our success because they have been instrumental
in setting our strategic direction, operating our business, identifying, recruiting and training
key personnel, identifying opportunities and arranging necessary financing. Losing the services of
any of these individuals could adversely affect our business until a suitable replacement could be
found. We believe that they could not quickly be replaced with executives of equal experience and
capabilities. Many of our executives are not bound by employment agreements with us, nor do we
maintain key person life insurance policies on any of our executives. See Item 11, Executive
Compensation.

In the last two years, we have experienced significant management changes. In December 2004,
our then Chief Executive Officer resigned. In 2005, six of our then executive officers resigned at
different times, including our former Chief Executive Officer, who served in that position for
approximately five months. In November 2005, our board of directors appointed Joseph Fortunato,
then our Chief Operating Officer, as our Chief Executive Officer. Some of these changes were the
result of the officers personal decision to pursue other opportunities. The remaining changes were
instituted by us as part of strategic initiatives executed in 2005. Effective April 17, 2006, our
Chief Operating Officer resigned to become a senior officer of Linens n Things, Inc. Until March
2007, following completion of the Merger, he continued to serve as Merchandising Counselor. In
April 2006, we appointed a new Chief Merchandising Officer, who resigned effective April 28, 2006,
because of disagreements about the direction of our merchandising efforts. Our Executive Chairman
of the Board, Robert J. DiNicola resigned immediately prior to the closing of the Merger.

In addition, Susan Trimbo resigned effective March 31, 2007 as our Senior Vice President of
Scientific Affairs, Mark Weintrub resigned effective September 30, 2007 as our Senior Vice
President and Chief Legal Officer and Curt Larrimer resigned effective December 31, 2007 as our
Executive Vice President and Chief Financial Officer. Although the duties of Chief Financial
Officer are being performed by J. Kenneth Fox, Senior Vice President and Treasurer, we have not yet
identified a permanent replacement for Mr. Larrimer. We will continue to enhance our management
team as necessary to strengthen our business for future growth. Although we do not anticipate
additional significant management changes, these and other changes in management could result in
changes to, or impact the execution of, our business strategy. Any such changes could be
significant and could have a negative impact on our performance and results of operations. In
addition, if we are unable to successfully transition members of management into their new
positions, management resources could be constrained.

Compliance with new and existing governmental regulations could increase our costs significantly
and adversely affect our results of operations.

The processing, formulation, manufacturing, packaging, labeling, advertising, and distribution
of our products are subject to federal laws and regulation by one or more federal agencies,
including the Food and Drug Administration, or FDA, the Federal Trade Commission, or FTC, the
Consumer Product Safety Commission, the United States Department of Agriculture, and the United
States Environmental Protection Agency. These activities are also regulated by various state,
local, and international laws and agencies of the states and localities in which our products are
sold. Government regulations may prevent or delay the introduction, or require the reformulation,
of our products, which could result in lost revenues and increased costs to us. For instance, the
FDA regulates, among other things, the composition, safety, labeling, and marketing of dietary
supplements (including vitamins, minerals, herbs, and other dietary ingredients for human use). The
FDA may not accept the evidence of safety for any new dietary ingredient that we may wish to
market, may determine that a particular dietary supplement or ingredient presents an unacceptable
health risk, and may determine that a particular claim or statement of nutritional value that we
use to support the marketing of a dietary supplement is an impermissible drug claim, is not
substantiated, or is an unauthorized version of a health claim. See Item 1, BusinessGovernment
regulationsProduct regulation. Any of these actions could prevent us from marketing particular
dietary supplement products or making certain claims or statements of nutritional support for them.
The FDA could also require us to remove a particular product from the market. For example, in April
2004, the FDA banned the sale of products containing ephedra. Sale of products containing ephedra
amounted to approximately $35.2 million, or 3.3%, of our retail sales in 2003 and approximately
$182.9 million, or 17.1%, of our retail sales in 2002. Any future recall or removal would result in
additional costs to us, including lost revenues from any additional products that we are required
to remove from the market, any of which could be material. Any product recalls or removals could
also lead to liability, substantial costs, and reduced growth prospects.

Additional or more stringent regulations of dietary supplements and other products have been
considered from time to time. These developments could require reformulation of some products to
meet new standards, recalls or discontinuance of some products not able to be reformulated,
additional record-keeping requirements, increased documentation of the properties of some products,
additional or different labeling, additional scientific substantiation, adverse event reporting, or
other new requirements. Any of these developments could increase our costs significantly. For
example, the Dietary Supplement and Nonprescription Drug Consumer Protection Act (S3546) which was
passed by Congress in December 2006, imposes significant new regulatory requirements on dietary
supplements including reporting of serious adverse events to FDA and recordkeeping requirements.
Although regulatory requirements created by the new legislation will not become mandatory until
December 2007, this new legislation could raise our costs and negatively impact our business. In
June 2007, the FDA adopted final regulations on Good Manufacturing Practice in manufacturing,
packaging, or holding dietary ingredients and dietary supplements, which will apply to the products
we manufacture. These regulations require dietary supplements to be prepared, packaged, and held in
compliance with certain rules. Although we will have until June 2008 to comply with these new
regulations, they could raise our costs and negatively impact our business. Additionally, our
third-party suppliers or vendors may not be able to comply with the new rules without incurring
substantial expenses. If our third-party suppliers or vendors are not able to timely

comply with the new rules, we may experience increased cost or delays in obtaining certain raw
materials and third-party products. Also, the FDA has announced that it plans to publish a
guidance governing the notification of new dietary ingredients in 2007. Although FDA guidance is
not mandatory, it is a strong indication of the FDAs current views on the topic discussed in the
guidance, including its position on enforcement. Depending on its recommendations, particularly
those relating to animal or human testing, such guidance could also raise our costs and negatively
impact our business. We may not be able to comply with the new rules without incurring additional
expenses, which could be significant. See Item 1, BusinessGovernment regulationProduct
regulation for additional information.

Our failure to comply with FTC regulations and existing consent decrees imposed on us by the FTC
could result in substantial monetary penalties and could adversely affect our operating results.

The FTC exercises jurisdiction over the advertising of dietary supplements and has instituted
numerous enforcement actions against dietary supplement companies, including us, for failure to
have adequate substantiation for claims made in advertising or for the use of false or misleading
advertising claims. As a result of these enforcement actions, we are currently subject to three
consent decrees that limit our ability to make certain claims with respect to our products and
required us to pay civil penalties and other amounts in the aggregate amount of $3.0 million. See
Item 1, BusinessGovernment regulationProduct regulation. Failure by us or our franchisees to
comply with the consent decrees and applicable regulations could occur from time to time.
Violations of these orders could result in substantial monetary penalties, which could have a
material adverse effect on our financial condition or results of operations.

As a retailer, distributor, and manufacturer of products designed for human consumption, we
are subject to product liability claims if the use of our products is alleged to have resulted in
injury. Our products consist of vitamins, minerals, herbs, and other ingredients that are
classified as foods or dietary supplements and are not subject to pre-market regulatory approval in
the United States. Our products could contain contaminated substances, and some of our products
contain ingredients that do not have long histories of human consumption. Previously unknown
adverse reactions resulting from human consumption of these ingredients could occur. In addition,
third-party manufacturers produce many of the products we sell. As a distributor of products
manufactured by third parties, we may also be liable for various product liability claims for
products we do not manufacture. We have been and may be subject to various product liability
claims, including, among others, that our products include inadequate instructions for use or
inadequate warnings concerning possible side effects and interactions with other substances. For
example, as of February 29, 2008, we have been named as a defendant in 2 pending cases involving
the sale of products that contain ephedra. See Item 1, BusinessLegal Proceedings. Any product
liability claim against us could result in increased costs and could adversely affect our
reputation with our customers, which in turn could adversely affect our revenues and operating
income. All claims to date have been tendered to the third-party manufacturer or to our insurer,
and we have incurred no expense to date with respect to litigation involving ephedra products.
Furthermore, we are entitled to indemnification by Numico for losses arising from claims related to
products containing ephedra sold before December 5, 2003. All of the pending cases relate to
products sold before that time.

Our operations are subject to environmental and health and safety laws and regulations that may
increase our cost of operations or expose us to environmental liabilities.

Our operations are subject to environmental and health and safety laws and regulations, and
some of our operations require environmental permits and controls to prevent and limit pollution of
the environment. We could incur significant costs as a result of violations of, or liabilities
under, environmental laws and regulations, or to maintain compliance with such environmental laws,
regulations, or permit requirements.

Because we rely on our manufacturing operations to produce nearly all of the proprietary products
we sell, disruptions in our manufacturing system or losses of manufacturing certifications could
adversely affect our sales and customer relationships.

Our manufacturing operations produced approximately 34% of the products we sold for the years
ended December 31, 2007 and 2006. Other than powders and liquids, nearly all of our proprietary
products are produced in our manufacturing facility located in Greenville, South Carolina. As of
December 31, 2007, no one vendor supplied more than 10% of our raw materials. In the event any of
our third-party suppliers or vendors were to become unable or unwilling to continue to provide raw
materials in the required volumes and quality levels or in a timely manner, we would be required to
identify and obtain acceptable replacement supply sources. If we are unable to obtain alternative
supply sources, our business could be adversely affected. Any significant disruption in our
operations at our Greenville, South Carolina facility for any reason, including regulatory
requirements or the loss of certifications, power interruptions, fires, hurricanes, war, or other
force of nature, could disrupt our supply of products, adversely affecting our sales and customer
relationships.

If we fail to protect our brand name, competitors may adopt trade names that dilute the value of
our brand name.

We have invested significant resources to promote our GNC brand name in order to obtain the
public recognition that we have today. However, we may be unable or unwilling to strictly enforce
our trademark in each jurisdiction in which we do business. In addition, because of the differences
in foreign trademark laws concerning proprietary rights, our trademark may not receive the same
degree of protection in foreign countries as it does in the United States. Also, we may not always
be able to successfully enforce our trademark against competitors or against challenges by others.
For example, a third party is currently challenging our right to register in the United States
certain marks that incorporate our GNC Live Well trademark. This third party initiated
proceedings in the United Stated Patent and Trademark Office to cancel four registrations for our
GNC Live Well mark. Subsequently, we permitted three of these registrations to lapse and the
Patent and Trademark Office has cancelled the fourth registration. Other third parties are also
challenging our GNC Live Well trademark in foreign jurisdictions. Our failure to successfully
protect our trademark could diminish the value and effectiveness of our past and future marketing
efforts and could cause customer confusion. This could in turn adversely affect our revenues and
profitability.

Intellectual property litigation and infringement claims against us could cause us to incur
significant expenses or prevent us from manufacturing, selling, or using some aspect of our
products, which could adversely affect our revenues and market share.

We are currently and may in the future be subject to intellectual property litigation and
infringement claims, which could cause us to incur significant expenses or prevent us from
manufacturing, selling, or using some aspect of our products. Claims of intellectual property
infringement also may require us to enter into costly royalty or license agreements. However, we
may be unable to obtain royalty or license agreements on terms acceptable to us or at all. Claims
that our technology or products infringe on intellectual property rights could be costly and would
divert the attention of management and key personnel, which in turn could adversely affect our
revenues and profitability.

A substantial amount of our revenues are generated from our franchisees, and our revenues could
decrease significantly if our franchisees do not conduct their operations profitably or if we fail
to attract new franchisees.

As of December 31, 2007 approximately 33%, and as of December 31, 2006 approximately 34%, of
our retail locations were operated by franchisees. Our franchise operations generated approximately
15.5% of our revenues for the year ended December 31, 2007 and approximately 15.6% of our revenues
for the same period in 2006. Our revenues from franchised stores depend on the franchisees ability
to operate their stores profitably and adhere to our franchise standards. The closing of
unprofitable franchised stores or the failure of franchisees to comply with our policies could
adversely affect our

reputation and could reduce the amount of our franchise revenues. These factors could have a
material adverse effect on our revenues and operating income.

If we are unable to attract new franchisees or to convince existing franchisees to open
additional stores, any growth in royalties from franchised stores will depend solely upon increases
in revenues at existing franchised stores, which could be minimal. In addition, our ability to open
additional franchised locations is limited by the territorial restrictions in our existing
franchise agreements as well as our ability to identify additional markets in the United States and other countries that are not currently
saturated with the products we offer. If we are unable to open additional franchised locations, we
will have to sustain additional growth internally by attracting new and repeat customers to our
existing locations.

Economic, political, and other risks associated with our international operations could adversely
affect our revenues and international growth prospects.

As of December 31, 2007, we had 147 company-owned Canadian stores and 1,078 international
franchised stores in 49 international markets. We derived 9.5% of our revenues for the year ended
December 31, 2007 and 8.7% of our revenues for 2006 from our international operations. As part of
our business strategy, we intend to expand our international franchise presence. Our international
operations are subject to a number of risks inherent to operating in foreign countries, and any
expansion of our international operations will increase the effects of these risks. These risks
include, among others:

Our franchise activities are subject to federal, state, and international laws regulating the
offer and sale of franchises and the governance of our franchise relationships. These laws impose
registration, extensive disclosure requirements, and bonding requirements on the offer and sale of
franchises. In some jurisdictions, the laws relating to the governance of our franchise
relationship impose fair dealing standards during the term of the franchise relationship and
limitations on our ability to terminate or refuse to renew a franchise. We may, therefore, be
required to retain an under-performing franchise and may be

unable to replace the franchisee, which could adversely impact franchise revenues. In
addition, we cannot predict the nature and effect of any future legislation or regulation on our
franchise operations.

We are not insured for a significant portion of our claims exposure, which could materially and
adversely affect our operating income and profitability.

We have procured insurance independently for the following areas: (1) general liability; (2)
product liability; (3) directors and officers liability; (4) property insurance; (5) workers
compensation insurance; and (6) various other areas. We are self-insured for other areas,
including: (1) medical benefits; (2) workers compensation coverage in New York, with a stop loss
of $250,000; (3) physical damage to our tractors, trailers, and fleet vehicles for field personnel
use; and (4) physical damages that may occur at company-owned stores. We are not insured for some
property and casualty risks due to the frequency and severity of a loss, the cost of insurance, and the overall risk analysis. In
addition, we carry product liability insurance coverage that requires us to pay
deductibles/retentions with primary and excess liability coverage above the deductible/retention
amount. Because of our deductibles and self-insured retention amounts, we have significant exposure
to fluctuations in the number and severity of claims. We currently maintain product liability
insurance with a retention of $2.0 million per claim with an aggregate cap on retained loss of
$10.0 million. As a result, our insurance and claims expense could increase in the future.
Alternatively, we could raise our deductibles/retentions, which would increase our already
significant exposure to expense from claims. If any claim exceeds our coverage, we would bear the
excess expense, in addition to our other self-insured amounts. If the frequency or severity of
claims or our expenses increase, our operating income and profitability could be materially
adversely affected. See Item 3, Legal proceedings.

The controlling stockholders of our Parent may take actions that conflict with the interests of
other stockholders and investors. This control may have the effect of delaying or preventing
changes of control or changes in management.

Affiliates
of Ares Management LLC and Teachers Private Capital, a division
of Ontario Teachers' Pension Plan Board, and certain of our directors
and members of our management will indirectly beneficially own substantially all of the outstanding
equity of our Parent and, as a result, will have the indirect power to elect our directors, to
appoint members of management, and to approve all actions requiring the approval of the holders of
our common stock, including adopting amendments to our certificate of incorporation and approving
mergers, acquisitions, or sales of all or substantially all of our assets. The interests of our
ultimate controlling stockholders might conflict with the interests of other stockholders or the
holders of our debt. Our ultimate controlling stockholders also may have an interest in pursuing
acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance
their equity investment, even though such transactions might involve risks to the holders of our
debt.

As of December 31, 2007, our total consolidated long-term debt (including current portion) was
approximately $1,087.0 million, and we had an additional $53.5 million available for borrowing on a
collateralized basis under our $60.0 million senior revolving credit facility after giving effect
to the use of $6.5 million of the revolving credit facility to secure letters of credit.

All of the debt under our senior credit facility bears interest at variable rates. We are
subject to additional interest expense if these rates increase significantly, which could also
reduce our ability to borrow additional funds.

Our substantial debt could have material consequences on our financial condition. For
example, it could:



make it more difficult for us to satisfy our obligations with respect to the New
Senior Notes and the New Senior Subordinated Notes;



increase our vulnerability to general adverse economic and industry conditions;



require us to use all or a large portion of our cash flow from operations to pay
principal and interest on our debt, thereby reducing the availability of our cash flow
to fund working capital, research and development efforts, capital expenditures, and
other business activities;



increase our vulnerability to general adverse economic and industry conditions;



limit our flexibility in planning for, or reacting to, changes in our business
and the industry in which we operate;



restrict us from making strategic acquisitions or exploiting business
opportunities;



place us at a competitive disadvantage compared to our competitors that have less
debt; and

For additional information regarding the interest rates and maturity dates of our existing debt,
see Item 7, Management Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital Resources.

Despite our current significant level of debt, we may still be able to incur additional debt, which
could increase the risks described above, adversely affect our financial health, or prevent us from
fulfilling our obligations under the New Senior Notes and the New Senior Subordinated Notes.

We and our subsidiaries may be able to incur additional debt in the future, including
collateralized debt. Although the New Senior Credit Facility and the indentures governing the New
Senior Notes and the New Senior Subordinated Notes contain restrictions on the incurrence of
additional debt, these restrictions are subject to a number of qualifications and exceptions. If
additional debt is added to our current level of debt, the risks described above would increase.

We require a significant amount of cash to service our debt. Our ability to generate cash depends
on many factors beyond our control and, as a result, we may not be able to make payments on our
debt obligations.

We may be unable to generate sufficient cash flow from operations, to realize anticipated cost
savings and operating improvements on schedule or at all, or to obtain future borrowings under our
credit facilities or otherwise in an amount sufficient to enable us to pay our debt or to fund our
other liquidity needs. In addition, because we conduct our operations through our operating
subsidiaries, we depend on those entities for dividends and other payments to generate the funds
necessary to meet our financial obligations, including payments on our debt. Under certain
circumstances, legal and contractual restrictions, as well as the financial condition and operating
requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries. If we
do not have sufficient liquidity, we may need to refinance or restructure all or a portion of our
debt on or before maturity, sell assets, or borrow more money. We may not be able to do so on terms
satisfactory to us or at all.

If we are unable to meet our obligations with respect to our debt, we could be forced to
restructure or refinance our debt, seek equity financing, or sell assets. If we are unable to
restructure, refinance, or sell assets in a timely manner or on terms satisfactory to us, the
trading price of the New Senior Notes and the New Senior Subordinated Notes could decline and we
may default under our

obligations. As of December 31, 2007 substantially all of our debt was subject to acceleration
clauses. A default on any of our debt obligations could trigger these acceleration clauses and
cause those and our other obligations to become immediately due and payable. Upon an acceleration
of any of our debt, we may not be able to make payments under our debt.

We may not have the ability to raise the funds necessary to finance the change of control offer
required by the indentures, which could cause us to default on our debt obligations, including the
New Senior Notes and the New Senior Subordinated Notes.

Upon certain change of control events, as that term is defined in the indentures governing
the New Senior Notes and the New Senior Subordinated Notes, we will be required to make an offer to
repurchase all or any part of each holders notes at a price equal to 101% of the principal
thereof, plus accrued interest to the date of repurchase. Because we do not have access to the cash
flow of our subsidiaries, we will likely not have sufficient funds available at the time of any
change of control event to repurchase all tendered notes pursuant to this requirement. Our failure
to offer to repurchase notes or to repurchase notes tendered following a change of control would
result in a default under the indentures. Accordingly, prior to repurchasing the notes upon a
change of control event, we must refinance all of our outstanding indebtedness. We may be unable
to refinance all of our outstanding indebtedness on terms acceptable to us or at all. If we were
unable to refinance all such indebtedness, we would remain effectively prohibited from offering to
repurchase the notes.

Restrictions in the agreements governing our existing indebtedness may prevent us from taking
actions that we believe would be in the best interest of our business.

The agreements governing our existing indebtedness contain customary restrictions on us or our
subsidiaries, including covenants that restrict us or our subsidiaries, as the case may be, from:



incurring additional indebtedness and issuing preferred stock;



granting liens on our assets;



making investments;



consolidating or merging with, or acquiring, another business;



selling or otherwise disposing our assets;



paying dividends and making other distributions to GNC Parent LLC or GNC
Corporation; and



entering into transactions with our affiliates.

Our ability to comply with these covenants and other provisions of the New Senior Credit
Facility and the indentures governing the New Senior Notes and the New Senior Subordinated Notes
may be affected by changes in our operating and financial performance, changes in general business
and economic conditions, adverse regulatory developments, or other events beyond our control. The
breach of any of these covenants could result in a default under our debt, which could cause those
and other obligations to become immediately due and payable. If any of our debt is accelerated, we
may not be able to repay it.

The senior credit facility also requires that we meet specified financial ratios, including,
but not limited to, maximum total leverage ratios. These restrictions may prevent us from taking
actions that we believe would be in the best interest of our business and may make it difficult for
us to successfully execute our business strategy or effectively compete with companies that are not
similarly restricted.

As of December 31, 2007, there were 6,159 GNC store locations globally. In our Retail segment,
all but one of our company-owned stores are located on leased premises that typically range in size
from 1,000 to 2,000 square feet. In our Franchise segment, substantially all of our franchised
stores in the United States and Canada are located on premises we lease and then sublease to our
respective franchisees. All of our franchised stores in 49 international markets are owned or
leased directly by our franchisees. No single store is material to our operations.

In our Manufacturing/Wholesale segment, we lease facilities for manufacturing, packaging,
warehousing, and distribution operations. We manufacture a majority of our proprietary products at
an approximately 300,000 square-foot facility in Greenville, South Carolina. We also lease an
approximately 630,000 square-foot complex located in Anderson, South Carolina, for packaging,
materials receipt, lab testing, warehousing, and distribution. Both the Greenville and Anderson
facilities are leased on a long-term basis pursuant to fee-in-lieu-of-taxes arrangements with the
counties in which the facilities are located, but we retain the right to purchase each of the
facilities at any time during the lease for $1.00, subject to a loss of tax benefits. We lease a
210,000 square-foot distribution center in Leetsdale, Pennsylvania and a 112,000 square-foot
distribution center in Phoenix, Arizona. We also lease space at a distribution center in Canada.

We lease four small regional sales offices in Clearwater, Florida; Fort Lauderdale, Florida;
Tustin, California; and Mississauga, Ontario. None of the regional sales offices is larger than
5,000 square feet. Our 253,000 square-foot corporate headquarters in Pittsburgh, Pennsylvania, is
owned by Gustine Sixth Avenue Associates, Ltd., a Pennsylvania limited partnership, of which
General Nutrition Incorporated, one of our subsidiaries, is a limited partner entitled to share in
75% of the partnerships profits or losses. The partnerships ownership of the land and buildings,
and the partnerships interest in the ground lease to General Nutrition Incorporated, are all
encumbered by a mortgage in the original principal amount of $17.9 million, with an outstanding
balance of $9.8 million as of December 31, 2007. This partnership is included in our consolidated
financial statements.

ITEM 3. LEGAL PROCEEDINGS.

We are engaged in various legal actions, claims, and proceedings arising out of the normal
course of business, including claims related to breach of contracts, product liabilities,
intellectual property matters, and employment-related matters resulting from our business
activities. As is inherent with most actions such as these, an estimation of any possible and/or
ultimate liability cannot always be determined. We continue to assess our requirement to account
for additional contingencies in accordance with SFAS No. 5, Accounting for Contingencies. We
believe that the amount of any potential liability resulting from these actions, when taking into
consideration our general and product liability coverage, including indemnification obligations of
third-party manufacturers, and the indemnification provided by Numico under the purchase agreement
entered into in connection with the Numico Acquisition, will not have a material adverse impact on
our business or financial, condition. However, if we are required to make a payment in connection
with an adverse outcome in these matters, it could have a material impact on our financial
condition and operating results.

As a manufacturer and retailer of nutritional supplements and other consumer products that are
ingested by consumers or applied to their bodies, we have been and are currently subjected to
various product liability claims. Although the effects of these claims to date have not been
material to us, it is possible that current and future product liability claims could have a
material adverse impact on our business or financial condition. We currently maintain product
liability insurance with a deductible/retention of $2.0 million per claim with an aggregate cap on
retained loss of $10.0 million. We typically seek and have obtained contractual indemnification
from most parties that supply raw materials for our products or that manufacture or market products
we sell. We also typically seek to be added, and have been added, as additional insured under most
of such parties insurance policies. We are also entitled to indemnification by Numico for certain
losses arising from claims related to products containing ephedra or Kava Kava sold prior to
December 5, 2003. However, any such indemnification or insurance is limited by its terms, and any
such indemnification, as a practical matter, is limited to the creditworthiness of the indemnifying
party and its insurer and by the absence of significant defenses by the insurers. We may incur
material products liability claims, which could increase our costs and adversely affect our
reputation, revenues, and operating income.

Ephedra (Ephedrine Alkaloids).
As of February 29, 2008, we had been named as a defendant in 2
pending cases involving the sale of third-party products that contain ephedra. Of those cases, one
involves a proprietary GNC product. Ephedra products have been the subject of adverse publicity and
regulatory scrutiny in the United States and other countries relating to alleged harmful effects,
including

the deaths of several individuals. In early 2003, we instructed all of our locations to stop
selling products containing ephedra that were manufactured by GNC or one of its affiliates.
Subsequently, we instructed all of our locations to stop selling any products containing ephedra by
June 30, 2003. In April 2004, the FDA banned the sale of products containing ephedra. All claims to
date have been tendered to the third-party manufacturer or to our insurer, and we have incurred no
expense to date with respect to litigation involving ephedra products. Furthermore, we are entitled
to indemnification by Numico for certain losses arising from claims related to products containing
ephedra sold prior to December 5, 2003. All of the pending cases relate to products sold prior to
such time and, accordingly, we are entitled to indemnification from Numico for all of the pending
cases.

Pro-Hormone/Androstenedione Cases.
We are currently defending against five lawsuits (the
Andro Actions) relating to the sale by GNC of certain nutritional products alleged to contain the
ingredients commonly known as Androstenedione, Androstenediol, Norandrostenedione, and
Norandrostenediol (collectively, Andro Products). These five lawsuits were filed in California,
New Jersey, New York, Pennsylvania, and Florida.

In each of the five cases, plaintiffs have sought, or are seeking, to certify a class and
obtain damages on behalf of the class representatives and all those similarly-situated who
purchased certain nutritional supplements from the Company alleged to contain one or more Andro
Products.

On April 17 and 18, 2006, we filed pleadings seeking to remove each of the Andro Actions to
the respective federal district courts for the districts in which the respective Andro Actions are
pending. At the same time, we filed motions seeking to transfer each of the Andro Actions to the
United States District Court for the Southern District of New York based on related to bankruptcy
jurisdiction, as one of the manufacturers supplying us with Andro Products, and to whom we sought
indemnity, MuscleTech Research and Development, Inc. (MuscleTech), filed bankruptcy. We were
successful in removing the New Jersey, New York, Pennsylvania, and Florida Andro Actions to federal
court and transferring these actions to the United States District Court for the Southern District
of New York based on bankruptcy jurisdiction. The California case was not removed and remains
pending in state court.

Following the conclusion of the MuscleTech Bankruptcy case, plaintiffs, in September 2007,
filed a stipulation dismissing all claims related to the sale of MuscleTech products in the four
cases currently pending in the Southern District of New York (New Jersey, New York, Pennsylvania,
and Florida). Additionally, plaintiffs have filed motions with the Court to remand these actions to
their respective state courts, asserting that the federal court is divested of jurisdiction because
the MuscleTech bankruptcy action is no longer pending. The motions to remand remain pending before
the District Court. A more detailed description, listed by original state court proceeding and
current style, follows:


Harry Rodriguez v. General Nutrition Companies, Inc.
(previously pending in the Supreme
Court of the State of New York, New York County, New York, Index No. 02/126277 and currently styled
Harry Rodriguez, individually and on behalf of all others similarly situated, v. General Nutrition
Companies, Inc., Case No. 1:06-cv-02987-JSR, In the United States District Court for the Southern
District of New York). Plaintiffs filed this putative class action on or about July 25, 2002. The
Second Amended Complaint, filed thereafter on or about December 6, 2002, alleged claims for unjust
enrichment, violation of General Business Law Section 349 (misleading and deceptive trade
practices), and violation of General Business Law Section 350 (false advertising). On July 2, 2003,
the court granted part of the GNC motion to dismiss and dismissed the unjust enrichment cause of
action. Still pending are plaintiffs claims of false advertising and misleading and deceptive
trade practices. . On January 4, 2006, the court conducted a hearing on the GNC motion for summary
judgment and plaintiffs motion for class certification, both of which remain pending.


Everett Abrams v. General Nutrition Companies, Inc.
(previously pending in the Superior
Court of New Jersey, Mercer County, New Jersey, Docket No. L-3789-02 and currently styled Everett
Abrams, individually and on behalf of all others similarly situated, v. General Nutrition
Companies, Inc., Case No. 1:06-cv-07881-JSR, In the United States District Court for the Southern
District of New York). Plaintiffs filed this putative class action on or about July 25, 2002. The
Second Amended Complaint, filed

thereafter on or about December 20, 2002, alleged claims for false and deceptive marketing and
omissions and violations of the New Jersey Consumer Fraud Act. On November 18, 2003, the court
signed an order dismissing plaintiffs claims for affirmative misrepresentation and sponsorship
with prejudice. The claim for knowing omissions remains pending.


Shawn Brown, Ozan Cirak, Thomas Hannon, and Luke Smith v. General Nutrition Companies,
Inc
. (previously pending in the 15th Judicial Circuit Court, Palm Beach County, Florida, Index. No.
CA-02-14221AB and currently styled Shawn Brown, Ozan Cirak, Thomas Hannon and Luke Smith, each
individually and on behalf of all others similarly situated v. General Nutrition Companies, Inc.,
Case No. 1:07-cv-06356-UA, In the United States District Court for the Southern District of New
York). Plaintiffs filed this putative class action on or about July 25, 2002. The Second Amended
Complaint, filed thereafter on or about November 27, 2002, alleged claims for violations of the
Florida Deceptive and Unfair Trade Practices Act, unjust enrichment, and violation of Florida Civil
Remedies for Criminal Practices Act. These claims remain pending.


Andrew Toth v. General Nutrition Companies, Inc., et al
. (previously pending in the Common
Pleas Court of Philadelphia County, Philadelphia, Class Action No. 02-703886 and currently styled
Andrew Toth and Richard Zatta, each individually and on behalf of all others similarly situated v.
Bodyonics, LTD, d/b/a Pinnacle and General Nutrition Companies, Inc., Case No. 1:06-cv-02721-JSR,
In the United States District Court for the Southern District of New York). Plaintiffs filed this
putative class action on or about July 25, 2002. The Amended Complaint, filed thereafter on or
about April 8, 2003, alleged claims for violations of the Unfair Trade Practices and Consumer
Protection Law, and unjust enrichment. The court denied the plaintiffs motion for class
certification, and that order has been affirmed on appeal. Plaintiffs thereafter filed a petition
in the Pennsylvania Supreme Court asking that the court consider an appeal of the order denying
class certification. The Pennsylvania Supreme Court denied the petition after the case against GNC
was removed as described above. The claims for violations of the Unfair Trade Practices and
Consumer Protection Law and unjust enrichment remain pending.


Santiago Guzman
,
individually, on behalf of all others similarly situated, and on behalf
of the general public v. General Nutrition Companies, Inc.
(pending on the California Judicial
Counsel Coordination Proceeding No. 4363, Los Angeles County Superior Court). Plaintiffs filed this
putative class action on or about February 17, 2004. The Second Amended Complaint, filed on or
about November 27, 2006, alleged claims for violations of the Consumers Legal Remedies Act,
violation of the Unfair Competition Act, and unjust enrichment. These claims remain pending.

On January 25, 2008, a mediation was held for the Andro Actions and no resolution was reached.
Based upon the information available to us at the present time, we believe that these matters will
not have a material adverse effect upon our business or financial condition. As any liabilities
that may arise from these cases are not probable or reasonably estimable at this time, no liability
has been accrued in the accompanying financial statements.

Class Action Settlement.
Five class action lawsuits were filed against us in the state courts
of Alabama, California, Illinois, and Texas with respect to claims that the labeling, packaging,
and advertising with respect to a third-party product sold by us were misleading and deceptive. We
denied any wrongdoing and are pursuing indemnification claims against the manufacturer. As a result
of mediation, the parties agreed to a national settlement of the lawsuits, which has been approved
by the court. Notice to the class has been published in mass advertising media publications. In
addition, notice has been mailed to approximately 2.4 million GNC Gold Card members. Each person
who purchased the third-party product and who is part of the class and who presented a cash
register receipt or original product packaging will receive a cash reimbursement equal to the
retail price paid, net of sales tax. Class members who purchased the product, but who do not have a
cash register receipt or original product packaging, were given an opportunity to submit a signed
affidavit that would then entitle them to receive one or more coupons. The deadline for submission
of register receipts, original product packaging, or signed affidavits, was January 5, 2007. The
number of coupons will be based on the total amount of purchases of the product subject to a
maximum of five coupons per purchaser. Each coupon will have a

cash value of $10.00 valid toward any purchase of $25.00 or more at a GNC store. The coupons
will not be redeemable by any GNC Gold Card member during Gold Card Week and will not be redeemable
for products subject to any other price discount. The coupons are to be redeemed at point of sale
and are not mail-in rebates. They will be redeemable for a 90-day period from the date of issuance.
We also agreed to donate 100,000 coupons to the United Way. In addition to the cash reimbursements
and coupons, as part of the settlement we paid legal fees of approximately $1.0 million and
incurred advertising and postage costs of approximately $0.4 million in 2006. Additionally, as of
June 30, 2007, an accrual of $0.3 million existed for additional advertising and postage costs
related to the notification letters. The deadline for class members to opt out of the settlement
class or object to the terms of the settlement was July 6, 2006. A final fairness hearing took
place on January 27, 2007. As of February 29, 2008, there had been 651 claims forms submitted. Due
to the uncertainty that exists as to the extent of future sales to the purchasers, the coupons are
an incentive for the purchasers to buy products or services from us (at a reduced gross margin).
Accordingly, the Company will recognize the settlement by reducing revenue in future periods when
the purchasers utilize the coupons.

Franklin Publications.
On October 26, 2005, General Nutrition Corporation was sued in the
Common Pleas Court of Franklin County, Ohio by Franklin Publications, Inc. The case was
subsequently removed to the United States District Court for the Southern District of Ohio, Eastern
Division. At the end of February, 2008, the case was settled. The lawsuit was based upon the GNC
subsidiarys termination, effective as of December 31, 2005, of two contracts for the publication
of two monthly magazines mailed to certain GNC customers. Franklin was seeking a declaratory
judgment as to its rights and obligations under the contracts and monetary damages for the GNC
subsidiarys alleged breach of the contracts. Franklin also alleged that the GNC subsidiary had
interfered with Franklins business relationships with the advertisers in the publications, who
were primarily GNC vendors, and had been unjustly enriched. We believe that the settlement will
not have a material adverse effect on our business or financial condition.

Wage and Hour Claim.
On August 11, 2006, the Company and General Nutrition Corporation, one of
the Companys wholly owned subsidiaries, were sued in federal district court for the District of
Kansas by Michelle L. Most and Mark A. Kelso, on behalf of themselves and all others similarly
situated. The lawsuit purports to certify a nationwide class of GNC store managers and assistant
managers and alleges that GNC failed to pay time and a half for working more than 40 hours per
week. Plaintiffs contend that the Company and General Nutrition Corporation improperly applied
fluctuating work week calculations and procedures for docking pay for working less than 40 hours
per week under a fluctuating work week. In May 2007, the parties entered into a settlement of the
claims, which is subject to court approval. On or about July 3, 2007, the Company sent a notice to
all potential claimants, who may then elect to opt in to the settlement. While the actual
settlement amount will be based on the number of claimants who actually opt in to participate in
the settlement, if approved by the court, the settlement contemplates a maximum total payment by
the Company of $1.9 million if all potential claimants opt in. Based on the number of actual
opt-ins, the total amount paid in the third quarter of 2007 to the class is approximately $0.1
million. In addition, the Company paid the plaintiffs counsel an agreed amount of $0.7 million for
attorneys fees following approval by the court of the settlement. On July 23, 2007, the court
approved the settlement of claims as fair, reasonable, and adequate and entered its Order of
Approval. The total amount paid to the class approximated $0.1 million. Final Judgment was
entered by the Court on December 18, 2007 disposing of the claims of the opt-in plaintiffs.

California Wage and Break Claim
. On April 24, 2007, Kristin Casarez and Tyler Goodell filed a
lawsuit against us in the Superior Court of the State of California for the County of Orange. We
removed the lawsuit to the United States District Court for the Central District of California.
Plaintiffs purport to bring the action on their own behalf, on behalf of a class of all current and
former non-exempt employees of GNC throughout the State of California employed on or after August
24, 2004, and as private attorney general on behalf of the general public. Plaintiffs allege that
they and members of the putative class were not provided all of the rest periods and meal periods
to which they were entitled under California law, and further allege that GNC failed to pay them
split shift and overtime compensation to which they were entitled under California law. We intend
to vigorously oppose class certification. Based on the information